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Morningstar, Inc.

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Event-Driven

Potash Corp Of Saskatchewan / Event-Driven

<ul><li class="p1">PotashCorp has withdrawn its bid to acquire German&nbsp;fertilizer and salt producer K+S at EUR 41 per share.</li><li class="p1">PotashCorp management cited challenging market&nbsp;conditions and a lack of engagement from K+S management&nbsp;as reasons for the withdrawal.</li><li class="p1">As we were skeptical that&nbsp;this deal would go ahead, our PotashCorp and K+S fair value&nbsp;estimates remain unchanged.</li><li class="p1">We think this is the right decision for PotashCorp. As we&nbsp;discussed in our June 26 note, EUR 41 per share was a rich&nbsp;price for K+S.</li><li class="p1">Although PotashCorp controlling more of the&nbsp;industry's capacity would likely have a positive effect on&nbsp;potash prices over the long run, we had doubts that any&nbsp;positive price impact would be enough to offset the rich&nbsp;valuation for K+S' assets.</li><li class="p1">We think K+S' management and board should have&nbsp;accepted PotashCorp's generous offer.</li><li class="p1">K+S shares are&nbsp;down roughly 25% after the announcement, to just above&nbsp;EUR 23 per share, putting K+S' price much closer to our fair&nbsp;value estimate of EUR 22 per share.</li></ul><p>Analyst: Jeffrey Stafford, CFA</p><p>Full report below the fold...</p>

PotashCorp has withdrawn its bid to acquire German&nbsp;fertilizer and salt producer K+S at EUR 41 per share.PotashCorp management cited challenging market&nbsp;conditions and a lack of engagement from K+S management&nbsp;as reasons for the withdrawal.As we were skeptical that&nbsp;this deal would go ahead, our PotashCorp and K+S fair value&nbsp;estimates remain unchanged.We think this is the right decision for PotashCorp. As we&nbsp;discussed in our June 26 note, EUR 41 per share was a rich&nbsp;price for K+S.Although PotashCorp controlling more of the&nbsp;industry's capacity would likely have a positive effect on&nbsp;potash prices over the long run, we had doubts that any&nbsp;positive price impact would be enough to offset the rich&nbsp;valuation for K+S' assets.We think K+S' management and board should have&nbsp;accepted PotashCorp's generous offer.K+S shares are&nbsp;down roughly 25% after the announcement, to just above&nbsp;EUR 23 per share, putting K+S' price much closer to our fair&nbsp;value estimate of EUR 22 per share.Analyst: Jeffrey Stafford, CFAFull report below the fold...

Dropping Its Bid for K+S Is the Right Choice for POT Shareholders